BUYING TIPS - Caveat Emptor

Caveat Emptor is Latin for “Let the buyer beware”, meaning the buyer assumes the risk in a transaction.

The PURPOSE of this section is to give you quality information to help you make your next purchase a clean and stress-free one with us.

[FREE BOOK] If you are buying in our local area and want to pop into our Sunnybank Hills office; we will give you a FREE BOOK called ‘REAL ESTATE UNCOVERED’ written by Mr Peter O’Malley. The below information are excerpts his book.

TRANSACTIONS COSTS: There are some obvious costs and some hidden costs. Stamp duty, solicitor’s fees, break fees from fixed interest rates, possible capital gains tax, building and pest inspection fees, mortgage contract fees, and if you’re selling (agent’s fees), compliance costs on getting your existing home ready and lost rent if you are selling an empty investment property, removalist costs.The biggest mistakes that can be very costly for you is to buy a property you cannot afford to hang onto. If you are forced to sell due to financial stress, you will incur many, if not all of these costs again.

TIP: start a journal/booklet and have a section on ‘Costs’ for you to write in.

GETTING PRE-APPROVED FINANCE: Your finance pre-approval gives you clear guidance on how much money you can spend. Is valid for 3 months and shows to that you’re serious. Bank will consider 1) your deposit amount 2) your ability to service the loan and 3) your credit rating and much more…

TIP: If you believe you have a bad credit rating, get this sorted out at least 12 months before getting your finance pre-approval. The banks have a long memory!

READING THE MARKET: The name of real estate investment game is sell high and buy low. Key indicators to look for are: Are there more ‘Sold’ signs or “For Sale’ signs in your area? Read the finance section of teh newspapers. Follow what expert commentators have to say. Never react to one article, but look for consensus among the experts.

TIP: Get a general feel of the areas you a buying in. Is it a Buyer’s market (70+ days on market) or a Seller’s market (10-30 days on market) or is it balanced (40 – 60 days on market). Knowledge is power. The more research you undertake beforehand, the more confident you will be to put an offer down on a house you love.

HOOKED ON BAIT PRICING: Avoid being snagged by the price quote. The problem is that lots of buyers can be attracted to the property by false price quotes or ‘bait pricing’. It is a real estate tactic designed to attract lots of bidders to an auction.

TIP: The best way to protect yourself against bait pricing is to disregard everything an agent tells you and do your own research. Believe nothing and check everything. If the price the agent quotes you seems too good to be true, it probably is.

PAYING THE PRICE: The internet is a great leveller, because transparency in real estate transactions favours the fair-minded, informed and decisive. The best homes are the least negotiable. When a buyer’s primary goal is getting a low price rather than buying a quality real estate, that buy may nab a bargain but they are unlikely to attain a sound investment. Cheap is rarely good and good is rarely cheap.

There are two key questions to ask yourself when making an offer to purchase. 1) Can you afford to pay the owner’s price? 2) Is the owner’s price fair and reasonable in the current market?

TIP: As a buyer, if you find the right home at a fair market price you can afford, pay the price before someone else does.

IT IS NOT PERSONAL: The most important thing to remember during any house price negotiation is that the negotiation must not become personal. Play the situation but don’t get caught up laying the person, otherwise the goodwill in your negotiation will evaporate in an instant.

The buyer’s low offer may genuinely be the highest that they can afford. Alternatively, the seller’s desired price may be the least they can genuinely afford to sell for, given where they intend to relocate to. Both parties my be able to find value and agreement on points other than price, but only if all parties accept that it is not personal, it’s just a negotiation process.

TIP: Maintain courtesy, composure and respect at all times, throughout negotiations and you may be surprised at what can be agreed upon.

REAL ESTATE POKER: ‘There is another buyer’. To navigate the negotiations well, there are a few simple rules you can keep in mind when faced with scenario.

Remain open to all possibilities. Disregard what other buyers may or may not do and what they do or don’t think the home is worth.

TIP: When making an offer, don’t play games with what you think the other competing buyers may offer. Decide what is more important to you – buying the right house in the right location or risk the purchase to try and save $10,000 or $20,000? Offer your best price for the home and walk away if the vendor does not accept it.

INFORMED BUYING: Knowledge is power. 1) Conduct your own research – view one hundred properties (internet); walk through twenty; make offers on four and buy one! [100:20:4:1]. 2) Find a good solicitor or conveyancer 3) Limit the well-meaning advisors – ask families of the pros and cons of the property you are purchasing. Never if you should or shouldn’t buy or how much to offer. There is too much responsibility attached to that answer. They will understandably answer conservatively ‘no don’t buy it’ or ‘only offer such and such an amount’. It is better to ask an expert those questions. 4) Attend the building and pest inspection – you will reduce your stress and not pass up the right property for you. 5) Door knock the neighbours to get a feel for the area – you may even want to buy the house even more!

TIP: Do your research, and ask the right questions to the right people. Friends and family may stop you from buying the right property.

BUYER’S REMORSE: Buyer’s remorse is very common and can creep up on you. You begin to question the decision: Did you pay too much? Can we manage the mortgage? Will the market finally crash now that we have bought? The best thing to do is recognize it and work through it quickly if it occurs. Families can tip you into a state of anxiety, while experienced and successful advisors and your own informed judgement should have helped you make the right decision by this time.

TIP: Recognize that buyer’s remorse is a common phenomenon. Stop looking at other houses – don’t do it. Unless you are about to close the deal but believe the contract may fall apart, there is no sense in making life harder by falling in love with another property.

GAZUMP AND GAZUNDER:

Gazump: an agreement between a buyer and a seller to purchase real estate at one price is broken by the seller in order to accept a higher price from a third party.

Gazunder: an agreement between a buyer and a seller to purchase real estate at one price is broken by the buyer immediately before exchanging contracts, so that they can reduce their offer.

Only the contracts counts! The period between the buyer and seller being in verbal agreement and contractual agreement can take up to two weeks. While goodwill holds the transaction together, don’t make the mistake of thinking any legal obligations is maintaining it, unless the contracts have been exchanged.

TIP: Reduced the period of uncertainty as much as possible and have the contracts fully signed by both parties and witnessed.

BUYING BEYOND THE PRESENTATION: Are you buying emotionally or logically? Sometimes a poor presentation will cause a buyer to believe the property is inferior. Conversely, a well-staged presentation may give buyers a false sense of value. New paint and cushions don’t change the fact that re-stumping the piers and serious rewiring work is required.

TIP: Questions to ask yourself 1) How will the home present once the designer furniture is removed? 2) How will the home present with my furnitures in it? 3) Is the actual home appealing to me or is it the presentation of the home 4) How practical will this home be for our needs?

IS THIS THE ONE FOR ME?: Knowing when to move on the right property. The best way to avoid years of niggling buyer’s remorse or financial disaster is to be well informed, decisive and patient. If you find yourself just wanting to buy something so you can stop looking every weekend, you may be better off to not look at all for a while.

TIP: Be well-informed, decisive and patient. If you’re fed up, then stop looking rather than buy the wrong house.

VERBAL OFFERS VS. CONTRACT OFFERS: So you found the ONE! The safest way for a buyer to submit an offer to an owner is conducting all due diligence in advance of signing a contract. Coordinating the pest and building inspector, the bank, the bank’s valuer and your solicitor or conveyancer in speedy fashion can be problematic. This process can take anywhere from three to fourteen days.

TIP: The most assertive way for a buyer to submit their offer is to sign a contract with a holding deposit once they have decided to buy the property. Avoid being gazumped!

STRATA TITLE VS TORRENS TITLE: Do we buy a house or a unit? There is widespread belief that houses perform much better over a longer period of time than apartments. But this is not universally correct. The running costs of unit and houses differ – insurance, maintenance etc. It is simply a matter of knowing what the strata fee covers and what the rental return the property is likely to provide before buying.

TIP: Define what the running and holding costs are on both unit and houses before making any decisions. Take your time to know the facts.

BUYING AN INVESTMENT PROPERTY: The reason people buy an investment property is to make profit. Don’t make the mistake of buying to access tax deductions, like negative gearing a property. Decide if you are buying for income or capital growth which is a reward of good-income producing property not a right.

TIP: 1) Work out the net return a property produces before you buy it. 2) Plan for the long term.

ARE YOU WORKING FOR YOURSELF OR FOR THE BANK?: The family home should not be treated as an investment property – as most homes usually rent for less than the cost of any mortgage on them. If you are buying a home with th intention of making money, paying over 6% on finance and getting a 2.5% return, begs the question: ‘Am I working for myself or for the bank?’

TIP: The sense of security and happiness that a home provides should be why you buy a family home.

YIELD – GROSS VS NET: What is the real rate of return? Gross 6% can be as little as 3% in your pocket after all mandatory expenses are taken into account. If you are buying purely for capital growth this is seen as speculation. Over the long term, capital growth is almost always influenced by a strong net yield and not the other way round. As an investor, focus on the net income.

TIP: Gross yield = a property’s annual income divided by its purchase price and multiplied by one hundred. Net Yield = a property’s annual income minus all expenses divided by its purchase price and multiplied by one hundred.

BUYING ‘OFF THE PLAN’: Is it worth the risk? When assessing the merits of an investment off the plan, consider whether the suggested value of the property can be validated by sales of similar properties in the broader market. Buying from a reputable developer is the most important element of buying off the plan. They must answer two key questions to your satisfaction: 1) is there a guarantee that the finish product will be the same standard as the displayed one? 2) What avenues of appeal do I have under the contract if the property has defects with the finish?

TIP: Consider two aspects of your investment 1) If the off the plan property purchase was completed, how would the price compare? 2) Are you paying a premium price? If so, what features are you paying a premium for?

SHOES OFF AT THE DOOR: As a guest to our homes, we would like you to respect our seller’s home and leave your shoes at the door.

LEAVE YOUR CONTACT DETAILS WITH THE AGENT: As a guest to the property, it is courteous and obligatory to leave your contact details with the agent.

GIVE FEEDBACK: Genuine feedback is important during the campaign of a property. Your feedback is valued (for house and price) and will be communicated back to our Sellers. This information is used to gauge the market, and make sure it’s campaign is on track with market conditions.

IT’S OKAY TO SAY NO TO THE HOUSE: We understand that not every house will suit everyone. The best thing you can do is give the agent feedback on the house and let the agent help you find the next house. At QMT Realty, we won’t get offended. In actual fact it makes it easier for us to look after you.

RETURN AGENT’S PHONE CALL: We know you’re busy and so are we. Our sellers are wanting to know if you are still interested in their home. If we can be of greater service let us know. Giving the message that you like the house and then silence when we follow up, is hard for owners and ourselves to understand. Like we said, ‘it’s okay to say no’, so that we can both move on to finding you the right property.

[FREE BOOK] If you are buying in our local area and want to pop into our Sunnybank Hills office; we will give you a FREE BOOK called ‘REAL ESTATE UNCOVERED’ written by Mr Peter O’Malley. The above information are excerpts his book.